The king of the shorts is at it again.
Michael Burry, who famously shorted the housing market by betting against the subprime market in the 2008 financial crisis, identified a new short-sale target in Caterpillar (CAT), the famed construction and mining equipment company. Writing in his Substack, Cassandra Unchained, Burry says that he shorted Caterpillar at $1,060.98 at the end of the second quarter, because he believes the stock has become overvalued due to the artificial intelligence (AI) infrastructure buildout.
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Caterpillar has been up big this year, rising by 86% in the first six months of the year. But Burry has seen enough.
“I have never shorted Caterpillar,” Burry wrote. “Today I shorted Caterpillar. It has always done great for me on the long side in the past.”
Burry has a proven track record for identifying short opportunities. When running the Scion Capital hedge fund, he correctly identified that an unsustainable bubble of subprime loans put the housing market in jeopardy. That bet was made famous by the book and movie of the same title, The Big Short.
Why is Burry targeting Caterpillar now? Let’s take a closer look.
About Caterpillar Stock
Caterpillar, whose headquarters is in Irving, Texas, is a manufacturer of construction and mining equipment. It is perhaps best known for its heavy construction products, including track-type tractors, excavators, motor graders, and skid steers. Caterpillar’s products are often painted in a distinctive yellow that has become synonymous with the brand. It has a market capitalization of $465 billion.
www.barchart.comShares are up 134% in the last 12 months, much higher than the 26% gain over the same period of the S&P 1500 Industrials sector. That’s because, as previously mentioned, Caterpillar is also getting attention as an AI infrastructure stock, making fast-response natural gas generators used by data centers to provide a continuous power source. And the company’s construction equipment is critical as companies seek to build data centers to expand their AI computing capacity rapidly.
Caterpillar CEO Joe Creed spoke on the matter at CES 2026:
“The digital world depends on a physical layer most people never think about. Every device in this room that you have depends on minerals that had to be pulled from the ground. Every data center behind the AI you’re going to see this week or you’re going to hear about this week was constructed from the ground up, and it stays online with power systems that provide reliable electricity. Every road, every port, every power line connecting our economy had to be built. That’s the invisible layer of the tech stack, the physical foundation for modern technology.”
That has made the stock pricey, however, as Burry has identified. Caterpillar’s forward price-to-earnings ratio of 38.3x is nearly double its five-year P/E mean of 20.2x. But so far, investors don’t seem to mind paying a premium for the stock.
Caterpillar also increased its dividend last month, hiking it 8% to $1.63 per quarter payable Aug. 19 to shareholders of record on July 20. Caterpillar now has a dividend yield of 0.67%, and has raised its dividend annually for 32 consecutive years.
Caterpillar Beats on Earnings
Caterpillar has managed to top analysts’ expectations in each of the last three quarters. For the first quarter of 2026, revenue was $17.42 billion, with earnings of $5.54 per share, beating analysts’ projections of $4.62 per share.
Core construction revenue increased 38% from a year ago, while Caterpillar’s power and energy segment revenue jumped 22% in the first quarter. Caterpillar attributed the latter gains to data centers seeking backup power generation products.
Management projected double-digit growth in revenue for the full year, and Caterpillar noted that data center customers are increasing their expectations for capital spending, with customers committing to long-term orders extending into 2028.
What Do Analysts Expect From CAT Stock?
Although Burry is shorting CAT, analysts are generally bullish on the company. Twenty-three analysts who cover the stock have a consensus “Moderate Buy” rating on Caterpillar, with 13 recommending investors buy and the other 10 suggesting they hold. The consensus price target of $1,005 represents potential upside of nearly 8%.
www.barchart.comThe reality is that Burry already has an unrealized profit, if he’s still holding the position. CAT stock is 12% off Burry’s short price.
Someone who initiates a new short position today would be entering at a much lower price than Burry did, making the bet more risky. It’s more likely that Caterpillar will recover some of its gains.
On the date of publication, Patrick Sanders did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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